Amazon's Alexa could be a $19 billion business by 2021, RBC says

Alex Wong/Getty ImagesCEO and founder of Amazon Jeff Bezos participates in a discussion during a Milestone Celebration dinner September 13, 2018 in Washington, DC. Economic Club of Washington celebrated its 32nd anniversary at the event.

Amazon‘s Alexa could generate between $US18 billion and $US19 billion in total sales by 2021 – around 5% of Amazon’s total revenue – according to a new report from RBC Capital Markets analyst Mark Mahaney.

RBC’s 2020 revenue estimate is more than 45% higher than its estimate from last year.

One of Wall Street’s biggest Amazon bulls just got more optimistic on Alexa’s future.

The voice assistant in Amazon’s smart speakers could generate around 5% of the e-commerce giant’s total revenue, or $US18 billion to $US19 billion, by 2021, according to a new report from RBC Capital Markets analyst Mark Mahaney.

Mahaney, who is a noted Amazon bull with a price target of $US2,300 a share – 54% above where shares were trading Friday, said he’s encouraged by how Amazon’s smart speakers have gained traction and is more convinced of their potential long-term impact.

“In general, Amazon’s device philosophy has been to sell the product (Kindle, Fire Tablet, Fire Stick, and even the Fire Phone…) at cost and capture margin on the services it provides when consumers use the product,” he wrote in the report. “We see increasing evidence that Amazon’s approach to Alexa is following a similar path.”

Mahaney’s revenue estimate is comprised of three slices:

$US9.2 billion in device sales.

$US9.4 billion in incremental voice-driven e-commerce sales.

Platform revenue (Mahaney believes there are now over 100 million Alexa-enabled devices installed).

RBC was encouraged by how many consumers owned voice-activated devices. The firm’s annual Alexa survey found that 41% of its respondents have at least one voice-activated device, up from 21.5% last December.

Amazon shares have been on a roller-coaster ride this year. They gained 75% through the first eight months of 2018, propelling the company to a market value of more than $US1 trillion, before a sharp sell-off that began in September tipped them into a bear market. Still, the stock was up 22% this year.

RBC Capital MarketsRBC found that 41% of its annual Alexa survey’s respondents have at least one voice-activated device, up from 21.5% last December.